Importance of Management Accounting Systems

The provided report highlights the crucial role of management accounting systems within a business. It emphasizes that accurate recording of daily transactions is essential for effective business management. Management accounting systems help maintain proper accounting records and assist managers in making informed decisions about business operations. The system is also vital for managing financial statements and presenting them as per relevant laws and statutes. This makes it a crucial aspect of successful business operation in the long run.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK...............................................................................................................................................1
1.1:Different types of accounting systems.............................................................................1
1.2: Several types of reporting system which has been used in an organisation....................2
1.3: Different advantages of using management accounting system.....................................4
1.4: Critical evaluation of accounting system report within an organisation.........................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Management accounting is a process of recording and collecting necessary data and
transactions and interpreting the same for the purpose of making necessary management
decisions. In a developing economy, there are various cases that may arise related to financial
management transactions. Every Business, whether it is operating in Manufacturing Sector or
Retail Sector has to make sure that effective accounting system is installed in the business so that
all the transactions can be recorded in an effective manner. By applying the same, The
management of UCK Group will be able to increase the overall profitability. The current report
will throw some light on the different types of accounting system as well as reporting that will be
used in organisation (Quattrone, P., 2016).
TASK
1.1:Different types of accounting systems
The concept of management accounting entails that accounts shall be properly managed
and represented in front of its users, be it both internal and external users. The management
accounting systems are full fledged tools and systems that stores various accounting information
within the business (Gates, S., Nicolas, J. L. and Walker, P. L., 2012). This accounting systems
helps in preparation as well as presentation of financial statements that are shown to external
parties like shareholders, consumers, suppliers etc. These stakeholders uses such financial
information for the purpose of making decisions regarding investment etc.
Every Organisation works on a consistent basis for the purpose of growing business and
at the same time making profits in an efficient way. The ultimate aim of almost every
organisation is to make sure that financial resources of the firm are adequately sued and put to
work, so that growth can be achieved and productivity in the business can be attained. For
example, To develop a new product, it is very important to use raw materials and the same has to
go through a process, for it to become a finished product that will be sold in the market. This
whole process lot of transactions, and it is very important that those transactions are recorded
through proper accounting system.
UCK group has been using various accounting technique for the purpose of collecting,
communicating, recording as well as evaluation of data, for achieving better and effective
outcomes. Accounts are being formulated by using various transactional informations and it has
to be made sure that those accounts are made in accordance with all the standards as well as
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accounting principles are there. Also, In formulation of financial reports, it is of paramount
importance that those reports are being prepared based on the international accounting
guidelines. These accounting Systems aid the management of UCK Furnitures to effectively
consider all the aspects of business and record them within the accounts of the company.
For the purpose of recording various data, company can use different accounting, which
are discussed as follows: Cost Accounting System: It is a accounting system that records all the cost that are
incurred by the company, it includes various fixed and variable cost incurred for the
purpose of managing the business in an effective manner. It also records the cost that
incurs in manufacturing or production of goods and services, these recording of cost
helps management in taking decision with regards to setting of prices for products and
ascertaining the profits of the organisation. There are two types of costing method
absorption costing and marginal costing. UCK Group uses absorption costing method for
the purpose of recording cost related data and formulating the same in an efficient
manner. Inventory Management System: It is a system of control which is mostly used for the
purpose of managing the inventory of the business. The total stock that is lying in the
stores along with the quality of the same has to be considered under this system. The
stock usually consist of Raw Material, Work in Progress, and finished goods. By the help
of this accounting systems UCK group can take care of their total stocks position that use
to provide minimum, maximum and normal stock position of the company. UCK Group
Furniture uses this management system for effectively managing its inventory in various
locations and keeping a record of furniture stock in an efficient way. Price Optimisation System: It is a accounting system, which is basically used for the
purpose of mathematical analysis of certain statistical information. It is basically used for
getting the viewpoint of clients about the various products and services of UCK Group
and what they think needs to be improved in the same. This particular system would
assist lot in taking valuable decision to pricing policies of products (Suomala, P. and
Lyly-Yrjänäinen, J., 2012).
 Job Costing System: Under this system of accounting,the cost of manufacturing is
determined for a specific Job separately and not on the basis of mass production. Thus, a
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separate costing is done for each job and then, that particular job is priced accordingly.
Such types of costing system are majorly used in those industries which works on job to
job basis. For example service industry. There are various clients who have a specific
requirement and thus they consider costing of each job specifically of every client and
they can not be charged with other clients in the same manner, because there
specifications is different.
1.2: Several types of reporting system which has been used in an organisation
For the purpose of communicating the financial information in an effective way, the
managers of UCK Group shall financial transaction in an efficient manner. Reporting system of
an organisation shall be based on the international guidelines and standards it should match with
all the accounting records of the company. There are many standards that needs to be followed
while framing reports, because these reports are being used by various users also known as
stakeholders like shareholders, customers, suppliers, governments etc. and they all uses it
according to their needs as well as demands.
These reports are also beneficial for the internal users as they can make necessary
decisions keeping in mind the various aspects related to business based on the reports. These
reports reflect the financial position of the company and the annual income that is generated
from the business. The income generated can be effectively applied into business over period of
time. There are various types of accounting systems that are being used by the UCK group on
consistent basis in their day to day operations that will be discussed as follows: Inventory Management Report: It refers to the report of quality and quantity of the
inventory that is there within the stock of company, also its pricing and what is the cost
that company is incurring for the management of the same will be posted under this
report. It is very useful report for internal uses as company can get a better and effective
view of its costing and then necessary decision can be taken for the purpose of effectively
managing the business. Account Receivable Report: It is a report related to the debt that has been given by the
company to other people or organisations. The customers who purchases goods or
services on credit basis are recorded under this kind of category. This receivable report
will be beneficial in analysing the credit that has been given by the organisation to
customers and is effective in analysing the delays in payment based on which penalty is
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charged from customers. Hence, it is important report for management of business in an
efficient manner (Ratnatunga, J. and Alam, M., 2011). Job Cost Report: The cost incurred for the purpose of completing a specific job is
calculated in this report and proper valuation of the cost is first done and then recorded in
this report.
 Performance Report: It refers to the annual report that is being Prepared by UCK Group
for the purpose of analysing the current financial position of the organisation and then
making necessary decisions to overcome the various issues. These performance report are
made on regular basis, but the main report is prepared in the end of financial year to
analyse the financial position of the organisation.
1.3: Different advantages of using management accounting system
Management accounting systems is a organised way of recording all the transactions as
well as data that will be beneficial for the business of the organisation. Management can
effectively use those information for the purpose of taking necessary business decisions and
implementing the same in the usual course of business over period of time. These can be helpful
to manage as well as evaluate their overall outcomes for company in future along with increasing
performances of the company (Dumitru, M. and et. al., 2011). It is said to be utmost important
needs for some industry to have identification of turnover and profit those are said to be beyond
the limitation of the organisation. There are various advantages of using management accounting
system in the organisation, which can be laid down as follows:
Management Accounting Systems Advantages
Cost Accounting System  Through using Cost accounting system,
a company will be able to effectively
manage its cost of business operations
over period of time and this can
enhance the overall growth of business
in the longer run.
 It helps the business managers to
effectively understand the structure of
costing of business and hence
management can accordingly price its
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products and services and overall
profitability can be increased in the
longer run of the organisation.
Inventory Management System  This system can help organisation in
managing the inventory of the firm by
placing the order at right time and
issuing the same to production
department as the demand occurs.
 It is a comparatively cost effective
system then other system of
accounting.
Performance Management System  The international norms as well as
standards on accounting requires that
all the transactions shall be accurately
accounted and a better as well as
effective representation of the same can
be made to the external users. This will
allow the users of the statements to get
a better as well as effective view of the
financial position of the company.
 The performance of the organisation
can be managed through this system
and allows an organisation to frame a
effective report for the presentation of
the organisation's growth.
1.4: Critical evaluation of accounting system report within an organisation
In order to present the various details related to different aspects of business various
reports are being prepared on a continuous basis and thus the need is to make sure that those
reports are prepared in the most appropriate manner possible ( Sisaye, S. and Birnberg, J. G. eds.,
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2012). it deal with all those aspects related with reporting tools can be helpful in order to make
crucial plan for upcoming estimations. Some of them are discuss underneath:
Management Accounting systems Integration of Accounting System with
organisational process.
Account Receivable Systems: These are very
important systems from the point of view of
management as these helps in deciding the
credit policy of the organisation, it is also
necessary in making a proper payment delivery
system, which will ensure payment of debt by
the debtors on time and the aim is to make a
reduction in defaults in payments that are being
made by the customers.
This system can help organisation in
determining the various amount that has been
disbursed as credit sales. Accounts receivable
system also keeps a track of all the delays in
payment of money and whether the chances of
default are high or not is also considered by the
system.
Inventory Management Systems: Inventory
Management systems helps in managing the
level of inventory and to achieve a overall cost
reduction. These reports can help in proper
stock evaluation as well as valuation. These
reports are necessary for managing inventories
level efficiently.
It is a system which helps in managing the
level of inventory by selecting the rate at which
the stock has to be ordered and at what prices,
the aim is to maintain a optimal cost structure
for Inventory.
Performance Management System:
Performance management Systems are helpful
for the management to evaluate as to where
UCK Group stands and what measures can be
taken to overcome the various financial and
operational issues in an effective way. These
reports can also aid external users for
effectively taking the necessary decisions with
regards to investments (Wynn, M. T., Low, W.
Z. and Nauta, W., 2013).
This is a system which generates annualised
reports for the purpose of making assessment
of the financial and economical position of the
company in the longer run. Where company
stands, what has been the revenue and
profitability growth along with the future
prospects available to the company for growth.
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CONCLUSION
Thus, From the above report it can be concluded that the role of accounting systems
within the business is quite huge. Business can not be managed effectively, if all the transactions
that takes place on day to day basis are recoded in proper manner. Thus, management
accounting system helps in maintaining the accounting records in an appropriate manner as well
as assist management of the organisation in taking right decision about their business operations.
Also management accounting system is a very crucial in effectively managing the financial
statements and presenting them as per the relevant laws and statutes. Hence, It can be concluded
that the role of management accounting is quite huge for effectively operating a successful
business in the longer run.
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REFERENCES
Books and Journals
Quattrone, P., 2016. Management accounting goes digital: Will the move make it wiser?.
Management Accounting Research. 31. pp.118-122.
Gates, S., Nicolas, J. L. and Walker, P. L., 2012. Enterprise risk management: A process for
enhanced management and improved performance. Management accounting quarterly.
13(3). pp.28-38.
Suomala, P. and Lyly-Yrjänäinen, J., 2012. Management accounting research in practice:
Lessons learned from an interventionist approach. Routledge.
Ratnatunga, J. and Alam, M., 2011. Strategic governance and management accounting: Evidence
from a case study. Abacus. 47(3). pp.343-382.
van Helden, J. and Uddin, S., 2016. Public sector management accounting in emerging
economies: A literature review. Critical Perspectives on Accounting. 41. pp.34-62.
Wynn, M. T., Low, W. Z. and Nauta, W., 2013, January. A framework for cost-aware process
management: generation of accurate and timely management accounting cost reports. In
Proceedings of the Ninth Asia-Pacific Conference on Conceptual Modelling-Volume
143 (pp. 79-88). Australian Computer Society, Inc..
Sisaye, S. and Birnberg, J. G. eds., 2012. An organizational learning approach to process
innovations: the extent and scope of diffusion and adoption in management accounting
systems. Emerald Group Publishing Limited.
Dumitru, M. and et. al., 2011. A historical approach of change in management accounting topics
published in Romania. Accounting and Management Information Systems. 10(3). p.375.
Online
Cost accounting. 2018.[Online]. Available through:
<https://webcache.googleusercontent.com/search?q=cache:_N_z61HSVoUJ:https://
www.accountingcoach.com/blog/what-is-cost-
accounting+&cd=6&hl=en&ct=clnk&gl=in>.
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